China Trademark Cancellations: Strategy and Timing (Part 2 of 2)

In part one of this two-part series, we discussed the general strategy when filing a non-use cancellation, and the steps you can take to increase your odds of success. In this concluding second part, we’ll discuss the timing of non-cancellation filings, and a specific strategy when dealing with a trademark squatter.

Unless motivated by spite, people file non-use cancellations to eliminate trademarks that stand in the way of their own trademark applications. They do so at one of two times: before filing an application (to eliminate potential obstacles) and after their application has been rejected (to eliminate cited obstacles).

In an ideal world, you would link a cancellation to a trademark application so that the CTMO examiner (or TRAB panel, as the case may be) would note the linkage and suspend their efforts until the cancellation was decided. But we do not live in an ideal world, and the CTMO does not suspend examinations or appeals until cancellations are decided. Instead, you have to work out the timing yourself and play the odds that the non-use cancellation will be decided first.

It’s an inexact science. If you are appealing a rejection, the window to file an appeal is so short that you have little choice but to file the appeal and non-use cancellation at the same time. But if you haven’t filed an application yet, the best way to ensure that the cancellation will be decided first is to file the non-use cancellation, wait a few months, and then file an application. Don’t wait too long, though: once the trademark owner has been notified (usually within 2-3 months of filing the non-use cancellation), they might file their own (new) application. Many applicants don’t bother trying to game the system; they file a non-use cancellation and a trademark application at the same time, and if they are unlucky enough to have the application examined first, they just file an appeal, secure in the knowledge that the cancellation will definitely be decided before the appeal is.

Filing a non-use cancellation against a trademark squatter has some unique challenges. Many trademark squatters never use the mark in commerce: their sole goal is to monetize the trademark by selling it to the “real” trademark owner, or to the highest bidder on the secondary market.

A trademark squatter could take a couple actions to foreclose the possibility of a non-use cancellation. First, they might sell a few branded goods via e-commerce, thus satisfying the use in commerce requirement. The CTMO does not require much evidence to satisfy the use requirement, and in my experience they won’t look past the basic facts to determine whether the evidence reflects a bona fide arms-length transaction (versus a fake sale to a friend or relative). Still, it takes some effort to create and maintain this evidence, and not all trademark squatters do it.

Second, the trademark squatter could file another, identical application before the three-year term is up, thereby preserving their rights with a new application even if the first registration is cancelled. But two can play that game. The real trademark owner could also file an application before the three year term is up – and then file a non-use cancellation exactly three years after registration. Sure, the application may be initially rejected if it’s decided before the cancellation, but you can then file an appeal, and the cancellation should be complete by the time the appeal is decided. This strategy takes time to execute, and it is not without risks. (What if the trademark squatter filed a new application before you? What if the cancellation fails because the trademark squatter actually had used the mark in commerce?) But if it works, you can retrieve the mark at a much lower cost, without involving the courts, and without having to pay off a trademark squatter. Or if you don’t want to wait for the various proceedings to wrap up, you could use the pending filings as leverage to negotiate a lower price from the trademark squatter.

Yes, it would be nice if China provided recourse against trademark squatters by more straightforward means. The letter of the Trademark Law provides remedies against trademark applications filed in bad faith: trademark oppositions (for pending applications) and invalidations (for existing registrations). But in the real world, trying to take on trademark squatters head-on has a very low chance of succeeding. Unless you’re willing to pay tens of thousands of dollars to retrieve “your” trademark, using the Chinese trademark system against them is usually the best hope.

Needless to say, cancelling a trademark squatter’s registration is predicated on the assumption that the squatter hasn’t used the mark in commerce. The more research you can do before filing a non-use cancellation, the better. Because if the squatter has in fact used the mark such that they can defeat a non-use cancellation, they’ll probably increase the sale price, figuring that you must really want the trademark.

About China Law Blog

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.